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Investors’ Corner (Midas Hldgs, CapitaLand, SATS, SGX)
Investors' Corner | 07 October 2011
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By: Gerald Teo
Articles (40) Profile

Midas Holdings
Price – $0.375
Target – $0.40

Midas’ share price has come off 7% since our August update, in-line with STI’s dismal performance and continued to be weighed down by negative news flow in September, for example the Shanghai metro train crash and delay in Ministry of Railways’ issue of bonds. Also, fixed asset railway investments have been dipping over the past few months to Rmb35b in August 2011, down 54% year on year. We now assume lower FY11-FY12 extrusion order wins of Rmb600m-Rmb300m (old: Rmb700m-Rmb750m), and smaller Nanjing SR Puzhen Rail Transport’s contribution of Rmb29m-Rmb29m (old: Rmb29m-Rmb57m). While we see the negatives as largely priced in at trough 0.7x forward PB ratio, we believe investors will take a more prudent approach before building position. Given a lack of near-term catalyst, we downgrade Midas to NEUTRAL. – DMG & Partners (04 Oct)

Price – $2.47
Target – $2.59

CapitaLand has sold another 10% of its stake in Bishan residential site to Shimizu Investment at cost. CapitaLand won the site from a government tender in February at a price of $550m or $869 psf per plot ratio, which is a record price for a mass market condo project. It then sold 25% of its stake in the site to Mitsubishi Estate Asia in March, also at cost. Hence, CapitaLand now has an effective stake of just 65% in the project. Shimizu will be invited to tender for the main contract for the Bishan development. The project is likely to be launched early next year. We believe this move may help in lowering the construction cost for the development. Management estimates breakeven cost of the project at $1300 psf. The reduction in its stake also helps to diversify some risks, given that the site was acquired at a high cost, in our view. But revised net asset value impact on the stock is small, in our view. Maintain HOLD. – RBS (03 Oct)

Price – $2.20
Target – $1.95

We lower earnings estimates by 3% to reflect lower top-line growth expectations for FY12 as the uncertainty posed by the possible debt restructurings and recession in Europe is likely to have a negative impact on aviation traffic, particularly premium (business) travel. In our view, the company might only enjoy limited upside from the low cost carrier (LCC)-driven traffic boom due to the significantly smaller wallets of the LCC segment. Rising wages and raw materials costs could negatively impact operating profit margins, amid a tight labour market and record-high food prices. Near-term, aviation travel, particularly premium traffic could also be negatively affected by the heightened risk aversion and uncertainty posed by the possible debt restructurings and recession in Europe. We rate SATS as SELL/LOW RISK. – Citigroup (30 Sep)

Singapore Exchange
Price – $6.72
Target – $8.70

Reuters reported that Singapore Exchange (SGX) is tying up with London Stock Exchange to make a joint bid for London Metal Exchange (LME), where price expectations could be as high as £1 billion, citing a source with direct knowledge of the situation. SGX would not comment on the matter. The LME reported profit of £9.5 million in 2010 (£13.6 million in 2009) so price expectations of £1 billion imply a trailing PE multiple of 105x. We understand there would be synergy potential from fee rate increases as well as cost reduction, but clearly substantial earnings upside would be needed to justify such a price. We believe any prospective LME acquirer would be advantaged by the ability to internalise clearing. SGX clearly has this capability but obtaining regulatory approval would be a key hurdle to overcome. In our view, the market would not react favourably to SGX participation in a transaction unless achievable synergy opportunities were clearly demonstrated. Recommend BUY. – Deutsche Bank (30 Sep)

Midas Hldgs  -- -- --   
Business: Manufacturer of aluminium alloy extrusion products for China's rail transportation sector. [FY16 Turnover] Aluminium alloy (99.3%), polyethylene pipe (0.7%).

Insight: Jan-18, Co announced that its JV company, CRRC Nan... Read More
CapitaLand  3.530 +0.02 +0.57%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
SATS  4.870 +0.09 +1.88%   
Business: Asia's leading provider of gateway services and food solutions. [FY19 Turnover] Food solutions (54.1%), gateway svcs (45.8%), others (0.1%).

Insight: May-19, FY19 revenue rose 6% to $1.8b driven by hi... Read More
Singapore Exchange  8.400 -0.10 -1.18%   
Business: [FY18 Turnover] Equities & fixed income (48.2%), derivatives (40.2%), mkt data & connectivity (11.6%).

Insight: Jan-19, 1H19 operating revenue increased 5.7% to $... Read More

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